Interest Rate Roundup

Thursday, November 02, 2006

furniture sales follies ... and a productivity plunge

The October retail sales data is out -- sales rose 3% YOY, the weakest growth since June. Here's the real kicker: Furniture store sales plunged 13.7%. That was much worse than the 5.1% YOY decline in September. It's also the worst YOY decline going back at least four and a half years (I don't have ready access to data before April 2002 right now). If you're looking for evidence of more "second round" impacts from the housing bust, you've got it.

Also, did you get a load of the productivity and unit labor cost data for Q3? Productivity was unchanged vs. expectations for a 1.1% YOY gain. Unit labor costs rose at a 3.8% pace; they're up 5.3% in the 12 months ended in September. Labor costs haven't risen by a greater amount since 1982.

The bond market is relatively sanguine about the numbers because the key October jobs report is released tomorrow. But here's my one thought: Given how FAST labor inflation, CPI inflation, etc., has been rising -- especially earlier this year -- how the heck did 10-year Treasury yields peak out around 5.25%? The last time key inflation readings were this bad (mid-1990s, early 1980s, depending on the indicator), interest rates were much, much higher. Just something to chew on.


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